Jumping Over the Easy but Necessary “Credit Counseling” Hurdle

Before you can file a personal bankruptcy case, you have to go through what for all practical purposes is nothing more than a bureaucratic formality. However, it is a strict legal requirement that can cause unnecessary headaches if not done correctly, so it’s important to understand it.

It’s the Law

Here is what the U.S. Bankruptcy Code says you must get “from an approved nonprofit budget and credit counseling agency” during the 180 before filing a bankruptcy case: “an individual or group briefing (including a briefing conducted by telephone or on the Internet) that outlined the opportunities for available credit counseling and assisted… in preforming a related budget analysis.”

What Does This “Counseling” Actually Involve?

It is nothing to lose sleep over. It’s quite a simple procedure almost always done on the internet or by phone, depending on your convenience. Essentially, you provide information on your debts, income, and expenses, and you’re told—surprise!—that you do not have enough income to meet your expenses. The practical benefit is that you get an emailed certificate, which enables you to file bankruptcy.

The timing is crucial. Since this certificate is good for only 180 days, don’t do the “counseling” unless you will be filing bankruptcy within that time. But you certainly don’t want to hold off too long to take of it, in case you need to file bankruptcy in a hurry.

What Was the Point of Creating This Requirement?

The point was to encourage people to consider alternatives other than bankruptcy. Some might instead say that the real point was to just make it that much harder to file bankruptcy.

The counseling was intended to help consumers make informed choices about bankruptcy and its alternatives. Yet . . . by the time most clients receive the counseling, their financial situations are dire, leaving them with no viable alternative to bankruptcy. As a result, the requirement may often serve more as an administrative obstacle than as a timely presentation of meaningful options.

Who To Contact to Get this “Counseling,” and How Much Does it Cost?

Credit counseling agencies that provide this service vary widely in quality, convenience, and cost, and also change over time. If you live in Texas in or around Rockwall, Heath, Greenville, Lavon, Wylie, Mesquite, or Rowlett, contact me, bankruptcy attorney Carrie Weir, for my current best recommendation. Also, to get an honest assessment of all your options, call for a free and confidential consultation. To set that up, please call me at 972-772-3083 or use the contact form here . Thank you.